Great Bear Resources (OTCPK:GTBDF) continues to be the darling in the junior mining sector, with a 300% return year-to-date, and a 145% return thus far this quarter. This incredible performance is due to the company's continued success at its Dixie Project in Red Lake, Ontario. The most recent step-out hole of 42 meters of 5 grams per tonne gold has given birth to the new 'Auro Zone.' In over a decade of investing in junior miners, I have not seen such unbridled enthusiasm over a stock since the days of Aurelian Resources in 2007. The big difference was that Aurelian Resources was the highest-grade project speculators will ever lay their eyes on, with mouth-watering drill intercepts like 250 meters of 35.20 grams per tonne gold. If speculators didn't know better, they would assume the company was setting up drill pads in Fort Knox. The company was eventually sold out to Kinross (KGC) for $1.2 billion, for a fraction of the price it should have received. The point, however, is that this company was generating this speculation based on the best drill holes the sector has ever seen, and an inferred resource of over 13 million ounces of gold. Great Bear Resources currently has no resource, but the discussion of a super system by geologists has it near $300 million. There are presently producers in the sector valued at lower valuations than Great Bear, and I believe that this frothiness is a bull trap for new buyers. The stock remains parabolic after its quarterly advance of over 130%, and this push to new highs is occurring with negative divergences. In a best-case scenario, I see the stock building a new base between C$8.00 and C$10.00 to digest its recent gains. In the worst case, I see the potential for a 25% or more significant correction from current levels to clear the
Great Bear Resources: Negative Divergences Showing Up
Summary
- Great Bear Resources has made a new high recently on waning momentum.
- The company's valuation remains stretched at a market capitalization of $295 million with no NI-43-101 resources yet.
- I continue to see this as opportune time for investors to book some profits in the stock.
Taylor Dart is an individual investor with over 16 years of trading experience, with his primary focus being precious metals developers, producers and royalty/streaming companies.
Taylor leads the investing group Alluvial Gold Research, where he offers portfolios with entry/exit points, Buy/Sell alerts, and proprietary sentiment indicators for gold and silver miners. Learn more.
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